WATER - ENERGY LINK EXPLORED AT PM'S CONFERENCE

UNCLAS SECTION 01 OF 02 TEL AVIV 002572 SIPDIS DEPT FOR NEA/RA, NEA/IPA, OES/SENV EPA FOR INTERNATIONAL - Metcalfe DOE FOR EERE AMMAN for ESTH - Bhalla E.O. 12958: N/A TAGS: SENV ENRG EINV IS SUBJECT: WATER - ENERGY LINK EXPLORED AT PM'S CONFERENCE TEL AVIV 00002572 001.2 OF 002 ¶1. (U) Summary: The Prime Minister's Conference on Export and International Cooperation on November 12 devoted a quarter of its program to the link between water and energy issues, in the context of green technologies and the business opportunities these present for Israeli exports. Israel's ongoing water shortage and drive for developing alternative energy sources have merged into a "clean-tech" business focus that is attracting global investor attention. Both public and private sectors in Israel hope this investment trend will help the country solve its projected shortfall of both critical resources. Meanwhile, those projections are worsening, and water rationing may be needed if conservation is insufficient. End Summary ¶2. (U) The Prime Minister's Conference on Export and International Cooperation was strongly focused this year on energy and water issues. Although the global financial crisis and its impact on Israel formed the backdrop of the discussions, the country's critical needs in these two areas drew high-level attention. Israeli Ministers of Environment and Infrastructure both spoke, as did the environment ministers from Korea, Romania, Hungary, and Serbia. The Israeli ministers dwelled on the nexus between water and energy: with water one can create power (hydropower),with power one can create freshwater (desalination). Poorly used water wastes energy, while recycling water can save energy. In effect, each cubic meter of water is valued at 4 kilowatts of electricity, thus leaving the tap running for five minutes, for example, is equal to 14 hours use of a 60 watt light bulb. The ministers urged that water and energy be thought of as interchangeable, and conservation be sought for both. Infrastructure Minister Ben-Eliezer restated his target of obtaining 15-20 percent of Israel's electric power from alternative energy by 2020, chiefly through solar technology. He intends to issue a tender each year for a new solar power plant, and has had the Negev Desert declared a reference region for alternative energy research to facilitate access to land. (Note: Bureacratic delays in designating land in the Negev as suitable for solar power has slowed Israel's adoption of this alternative energy source; IDF, National Parks and bedouin use also compete for space.) Ben-Eliezer wants to increase Israel's energy independence for both strategic and economic reasons. ¶3. (U) Environment Minister Gideon Ezra noted a cumulative deficit of 940 million cubic meters (mcm) of water over the last four years. This is nearly a year's worth of consumer demand for fresh drinking water. Already 43 percent of all agricultural water used is treated wastewater (greywater),but Israel's total of 1,175 mcm of water available for recycling is not being fully utilized. Within four years fully a third of Israel's water (including most consumer drinking water) is expected to come from desalination, but this will place a tremendous burden on the installed power generating capacity. Desalination will add 3 percent to total national electricity demand, on top of the 6 percent (expected to grow to 9 percent) of national demand used for pumping water around the country. Electricity demand is already growing by 1.2 percent each year. This could mean nearly 15 percent growth in electricity demand over the next five years. If the higher demand is satisfied through existing power generation methods (business-as-usual scenario) using coal and some natural gas, Ezra noted that Israel's Greenhouse Gas emissions will increase by 45 percent before 2030. Israel is constrained by environmental imperatives, by energy imperatives, by consumer demands, and now by global financial market restraints. ¶4. (U) The good news at the conference was the high rate of "clean tech" enterprise creation and investment Israel is experiencing. Israel boasts 270 water treatment and technology companies, over 100 alternative energy companies, and dozens of environmental technology firms. An estimated USD 100 billion in alternative energy was invested globally in 2007, and the global market for water technology is estimated at USD 450 billion in the coming five years. These are the growth markets Israeli firms are targeting, according to private sector participants at the conference. Local clean-tech firms received over USD 100 million in venture capital funds in 2007, according to industry sources. Private sector participants from both business and academia urged further investment in new technologies, and in combining technologies to resolve both energy and environmental problems at once. Cogeneration plants that reclaim thermal energy for desalination are an example, as is utilizing solar power for desalination energy needs. Business participants at the conference expressed confidence that global venture capital resources would rise to the challenge of finding the needed technologies, and in doing so would fund the research needed to keep Israel's green technology export sector expanding. Reports claim that Israeli water technology firms alone generated USD 1 billion in export sales in 2007. Equally important, foreign venture capital investment will help find the solutions to Israel's domestic water/energy constraints. TEL AVIV 00002572 002.2 OF 002 ¶5. (U) The up-beat investment picture contrasts sharply with the worsening projections of Israel's water/energy predicament. This year's rainy season got off to a strong start, but the forecast is not optimistic. In a special Cabinet meeting November 16, Israel Water Authority Director Uri Shani noted the decline of natural freshwater resources by 175 mcm, and said the forecast for the coming two years was for continued sub-normal rainfall. Savings of 30 mcm through government-promoted conservation measures were touted, but saving another 100 mcm would require drastic action, including the possibility of household rationing by Autumn 2009 and cutting a further 100 to 150 mcm from the share devoted to agriculture. The Infrastructure Minister warned that this could be a death blow to parts of the agricultural sector. Prime Minister Olmert blamed "unacceptable bureaucratic errors" for the delays in moving forward on new desalination plants, and led the Cabinet in action to waive the standard tender process for national water company Mekorot to facilitate quick construction of another desal plant in Ashdod. While desalination may be considered the ultimate solution, desal water consumes four times more energy than natural freshwater. Nonetheless, Israeli technology has helped the price of desal water drop from $4.00 per cubic meter in 1965 to $0.60 per cubic meter in 2008. The cost of energy, the chief component in the desal water price, has varied so wildly in the past year that long term water prices are hard to target, which complicates investment decisionmaking. Cunningham